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AXA Future Risks Report
Contents
5 Foreword by Thomas Buberl
6 Foreword by Ian Bremmer
8 Executive summary
10 Section 1 COVID-19 reshapes the emerging risk landscape
20 Section 2 Countries ignore climate change at their peril
26 Section 3 Cybersecurity and geopolitical tension remain
formidable foes
32 Section 4 Experts now comfortable with tech risk, but new
threats emerge
34 Section 5 Mental health and misinformation: candidates for
tomorrow’s top threat
38 About the research
04 Foreword 05 Foreword
Foreword
by Thomas Buberl,
CEO of AXA
As the world faces the unprecedented COVID-19 crisis
and its consequences, AXA’s Future Risks Report, now
in its seventh year, has never been more relevant.
Measuring and analyzing the perception of emerging
risks to anticipate major trends is essential for an
insurance company with a long-term focus and is
beneficial for society at large.
“ ...health is now
the top priority
— Thomas Buberl
The first lesson we take from this edition is that health is Our research also shows that 73% of the general public
now the top priority. While it is unfortunate that it took and 83% of risk experts believe that populations around
such a tragic context for it to reach number one in our the world are more vulnerable today than they were five
ranking, we find the increased awareness of health risks years ago. In an increasingly uncertain world with more
encouraging when compared with previous years. AXA complex and connected risks, I believe that insurance can
has long been convinced that health is one of the most offer protection, expertise, and clarity, thus contributing
important challenges of our time and is committed to to individual peace of mind and collective improvement.
protecting people and societies from the associated risks. This is why at AXA, in line with our purpose, we act for
human progress by protecting what matters.
The second lesson of this report is the decreased
perceived risk of climate change. While it remains the
highest priority for our European respondents, we note
that climate change has dropped to second place overall.
Given the context, this may not seem unusual, but the
drop in absolute terms is concerning, especially among
our American and Asian respondents, as we believe
that shorter-term issues around the pandemic should
not completely overshadow longer-term threats. I am
convinced that we must remain fully committed to doing
our part to tackle climate change, and AXA certainly is.
Last, this edition reinforced our observation from
previous years: risks are increasingly connected and
interdependent. The current pandemic exemplifies
how they are global, complex, and, therefore, difficult
to address. Insurers cannot tackle them alone. This is
why AXA was the first insurer to suggest the creation
of a pandemic insurance scheme to share the burden
between governments and private actors.
06 Foreword 07 Foreword
Foreword
by Ian Bremmer,
Eurasia Group and GZERO Media President
I’m so pleased that Eurasia Group is again Ultimately, however, the pandemic will make its deepest
collaborating with AXA on the Future Risks Report, mark on the world as the great accelerator of technology,
especially as the world grapples with the response to geopolitical, economic, and social trends already in
and recovery from the COVID-19 pandemic. place, but only incrementally emerging, when COVID-19
first hit. Before COVID-19, these trends were visible but
This report—and the collaboration behind it—feels looked set to unfold over five to ten years. With COVID-19,
particularly urgent. We need deep, subject-specific these transformations—digital adoption, remote
expertise to navigate the risks explored in this report. learning, US-China technology competition, supply chain
But that’s not enough. We also need to anticipate how reordering, and many others—are taking place in a
governments and other actors will respond to new risks, single year.
and we need to understand how the risk landscape is
shaped by changes underway in the global economy This great acceleration influences all the emerging
and its geopolitical foundations. The partnership and present risks identified and explored in this year’s
between Eurasia Group and AXA allows us to develop Future Risks Report. It makes all of them more urgent. As
that understanding. Thomas says, it also makes it more urgent that we work
together to overcome the daunting set of challenges now
Public health is, of course, now the top priority for facing the world.
nearly anyone who manages risk. COVID-19 and the
economic and social damage it brings have shocked
and challenged governments, people, and companies
in every corner of the globe. It has required urgent
adaptation from all of us, from how we live our daily lives
to how we interact with others and how we work (and, for
many, if and when we work).
“ COVID-19 has required urgent adaptation
from all of us, from how we live our daily
lives to how we interact with others and
how we work.
— Ian Bremmer
08 Executive summary 09 Executive summary
Executive summary
Preparing for the future requires an in-depth
assessment of emerging risks.
Technological revolution, climate change, ranks health concerns as the risk to which they feel most emails have surged and as employees have been using overlooked risk. This year, we believe mental health and
pandemics, and increasing geopolitical instability vulnerable, alongside computer-related risks. personal devices for work. Geopolitical instability, which misinformation are important risks that deserve focus
make it harder for policymakers, businesses, and experts rank as fourth-most-important, has heightened and have not yet fully captured the attention of
individuals to anticipate coming changes, overcome As pandemics and infectious diseases rose up the as some governments exert control over medical supplies experts.
challenges, and grasp opportunities. agenda, climate change slid for the first time since 2015, and protect strategically important businesses. Even
from the first to the second-most-important emerging social discontent and local conflicts, experts’ fifth-most- This report endeavors to identify which risks matter to
Therefore, for the seventh consecutive year, AXA sought risk to society. But more significantly, the breakdown of important risk, could surge as COVID-19 exposes and experts and the general public. The findings will
to highlight experts’ perceptions of future risks by the survey results by country reveals strong disparities in widens economic and social inequality. hopefully stimulate a debate about how they can be
conducting a structured survey of more than 2,700 risk the perception of climate-related risks. While European mitigated. In doing so, we hope to further our purpose:
experts from 54 countries. In addition, this year, AXA experts continue to identify climate risks as the most That’s all before taking into account the devastating act for human progress by protecting what matters.
worked with the research specialist Ipsos to gauge pressing threat to society, the number of North American- impact of COVID-19 and resulting lockdowns on the
the perception of the general public by surveying close based experts that consider climate change to be a top economy; experts consider macroeconomic risk to be the We hope you enjoy reading it.
to 20,000 people. AXA has also continued its emerging risk fell to 46%, from 71% last year. In parallel, seventh-most-important risk to society. In addition to the
partnership with Eurasia Group for its unique take on experts located in Asia are less concerned about the direct impact of lockdowns on economic activity, there’s
geopolitical themes. impact of climate change than the global average. a danger that the economic fallout will worsen if the
pandemic causes prolonged feelings of uncertainty and
This edition of AXA’s Future Risks Report was written in The countries that downplay the risk of climate change vulnerability among the general population, which,
unprecedented circumstances. As this report was being are among those that contribute most to its acceleration in turn, leads to less consumption. Our survey already
written, more than 33 million people worldwide had and are most likely to feel its effects. There is, therefore, a finds evidence of this. Almost three-quarters of the
been infected, and more than one million had died as a real danger that in focusing only on COVID-19, the threat general public say people feel more vulnerable compared
result of COVID-19.1 Countries that had initially brought that is right in front of us, other long-term challenges are with five years ago.
the virus under control were starting to experience a overlooked by the general public and decision-makers.
resurgence in cases. Similarly, the survey data also shows that risks related These examples illustrate the growing connectivity of
to natural resources are decreasing in importance, even risks, which we presented as one of the main findings
The onset of COVID-19 transformed pandemics and though the biodiversity crisis is accelerating. of last year’s report. This interlinking requires a global,
infectious diseases—previously an important yet perhaps interdisciplinary, and multi-stakeholder approach to
distant and unlikely risk—into an immediate and deadly In many ways, the crisis has been acting as an prevention and protection.
threat to the entire global population. As a result, accelerant of existing or nascent trends. All of the
surveyed experts today rank pandemics and infectious emerging risks that experts consider most important In addition to uncovering the emerging risks considered
diseases as the emerging risk that is the greatest today have been reshaped or exacerbated by COVID-19. most important today, this report also identifies the
threat to society in the next five to ten years, up from Cybersecurity risk, which experts rank as third-most- risks that have slipped under the radar. Last year, we
eighth place last year. In parallel, the general public important, has intensified as COVID-19-related phishing highlighted pandemics and infectious diseases as an
1
Worldometer, Coronavirus death toll, 28 September 2020
010 Section 1: COVID-19 reshapes the emerging risk landscape 011 Section 1: COVID-19 reshapes the emerging risk landscape
Pandemics and infectious diseases now top emerging risk
COVID-19 reshapes the 2020 2019
emerging risk landscape Pandemics and infectious diseases
Climate change
23%
54%
56%
67%
Cybersecurity risks 51%
56%
Geopolitical instability 38%
42%
Pandemics are now the top emerging risk Social discontent and local conflicts
28%
33%
New threats to security 30%
17%
Macroeconomic risks 24%
16%
Pandemics and infectious diseases are the most Given the current focus on tackling COVID-19, it is
Natural resources and biodiversity risks 22%
important risks to society in the next five to ten years, natural that experts’ primary concern when it comes to 27%
according to our surveyed experts. Last year, they ranked pandemics and infectious diseases relates to new strains Financial risks 21%
eighth. The number of experts that rank pandemics as of diseases and that other threats are deprioritized. This 15%
Pollution 20%
a major emerging risk more than doubled, from 23% to is illustrated in our survey data: the proportion of experts 23%
56%. The general public agrees: in our research, they rank who are concerned about antimicrobial resistance and
health risks as their top cause of vulnerability, alongside superbugs, for example, has tumbled from 29% last year 0% 10% 20% 30% 40% 50% 60%
computer-related risks. to 9% this year.
Fig 1 Q. Out of these 25 risks, please select the top five emerging risks that may have a significant impact on society
This is no surprise. When the survey for this report was There may have been a decrease in the perceived severity at large in the next five to ten years.
carried out in July 2020, more than half a million people of antimicrobial resistance, but it still has the potential
worldwide had succumbed to COVID-19,2 and many to create a future health crisis. Global spread of bugs’
countries were in lockdown. resistance to common antibiotics could dramatically The public feel most vulnerable to health and computer-related risks
raise the risk level of common healthcare treatments
So, unlike some of the other risks discussed in this report, such as chemotherapy, organ transplants, caesarean Health risks 6.1
this is a risk that is playing out today in an extreme way. sections, and hip replacements. This would not only
Computer-related risks 6.1
That is why 58% of experts describe this risk as “already prolong illness but also significantly increase the cost of
there,” and more people say that the risk of pandemics Climate change risks 5.9
healthcare. The impact of these risks may be less sudden
and infectious diseases is already present than they do than a pandemic, but the long-term effects have the Road risks 5.7
about any other emerging risk. potential to be equally devastating. Financial risks 5.6
Food risks 5.4
However, pandemics and infectious diseases are not Natural risks 5.5
just the top emerging risk because of the very current
The risk of unemployment 5.1
and tangible threat to the general population’s health.
Spiralling public debt, escalating geopolitical tension,
The risk of being mugged or robbed 5.1
growing mental health concerns, and surging inequality The risk of an attack/terrorism 4.9
are other emerging risks that have been triggered or The risk of a domestic accident 4.8
accelerated by COVID-19. In addition, there is a risk that Industrial risks 4.3
the public authorities’ focus on addressing COVID-19
might lead to the neglect of other major but less 0 1 2 3 4 5 6
imminent threats.
Fig 2 Q. How vulnerable do you feel to the following risks, on a scale of zero to ten? Zero meaning that you do not
feel vulnerable at all, and ten that you feel highly vulnerable.
2
Worldometer, Coronavirus death toll, 24 August 2020
12 Section 1: COVID-19 reshapes the emerging risk landscape 13 Section 1: COVID-19 reshapes the emerging risk landscape
Are the authorities prepared to tackle
the fallout from the pandemic?
Encouragingly, surveyed experts believe that public more experience in dealing with infectious diseases, such Why did AXA participate in Accordingly, the CATEX scheme has two main features.
authorities are more prepared to tackle pandemics as SARS in the early 2000s and, more recently, MERS in First, compensation would be automatic, based on
and infectious diseases than any other emerging risk. South Korea. the development of an the principle of parametric insurance. Compensation
The proportion that believes public authorities are well insurance mechanism against would then be triggered when one (or more) pre-
prepared has increased to 33% from 22% last year. defined event(s)—such as an administrative closure
Public authorities in Asia-Pacific exceptional risks? linked to a pandemic, natural disaster, or terrorist
Although there are clear examples of mistakes, most are considered best prepared for act—is pronounced by the public authorities. Then, the
governments around the world acted decisively to
pandemics and infectious diseases Alban de Mailly Nesle, AXA Group Chief compensation would be a lump sum. This would avoid
address the impacts of COVID-19. In France, for instance, the need to assess the operating losses incurred, thus
Risks & Investment Officer
the “temporary unemployment” scheme, under which significantly speeding up the claims management and,
Percentage that are absolutely or somewhat
the state pays subsidies to businesses to fund the The crisis we are currently experiencing is exceptional in therefore, the compensation process.
prepared for pandemics and infectious diseases
salaries of those prevented from working, was set up many ways and presents a so-called “systemic” risk event
to avoid mass bankruptcies and layoffs. At the end of 2020 2019 (i.e., it affects the entire system). It is worth mentioning Regarding the amount of the lump-sum compensation,
April 2020, close to nine million workers were benefiting that insurance is based on the principle of mutualization this system would be based on a public–private
from this emergency scheme. Many other countries have of risks between policyholders, which is how insurance partnership. The insurers and reinsurers would commit
introduced similar measures. premiums are calculated. If all individuals are affected, to an annual compensation capacity based on a
45% which is the case in a systemic risk event, insurance can proportion of the premiums collected. The CATEX project
“Governments reacted really quickly to COVID-19,” thus provides for an annual compensation capacity by
no longer function as traditionally understood.
says George Stansfield, AXA Deputy Group CEO and insurers and reinsurers of up to two billion euros. Beyond
Group General Secretary. “In most major industrialized It, therefore, seemed important to consider these new this capacity, the state alone would take over through
countries, packages were put in place very quickly to 34% risks and the insurance mechanisms that could be put in CCR, the public reinsurer.
protect workers from unemployment. This is in stark 31% place to deal with them. This is why AXA joined the
contrast to 2008.” Fédération Française de l’Assurance working group at What are the next steps?
27% Last June, the CATEX project was presented to the
the end of April to participate in the definition of a
However, governments may have acted swiftly to mitigate Ministry of the Economy and Finance, which chose to
22% possible future insurance scheme for exceptional
the immediate direct impacts of COVID-19, but it remains open public consultation on the subject in order to
catastrophes (“CATEX” scheme) through the
to be seen how well they cope with the long-term 18% allow all interested stakeholders, such as companies
16% 16% appointment of Jacques de Peretti, CEO of AXA France,
challenges that may follow. and industry associations, to express their needs and
as co-sponsor of the industry working group.
preferences in terms of coverage for exceptional risks
The perceived competence of public authorities varies such as pandemics before a debate with French MPs.
How would this scheme work?
significantly around the world. For example, 45% of The consultation ended on August 31, and we are now
The French scheme is intended to be a simple
experts in Asia-Pacific say that public authorities are awaiting the directions that the Minister wishes to give to
mechanism with a rapid compensation process. In the
well prepared for pandemics and infectious diseases, this project.
event of a claim, it is crucial to provide financial support
compared with 34% in Europe, 22% in Africa, and just
as quickly as possible to professionals, particularly SMEs,
16% in the Americas. In 2019, only 31% of experts in Asia Asia-Pacific Europe Africa The Americas
who face sudden interruptions or significant reductions
and 18% in Europe said that their public authorities were
in their business income.
well prepared for pandemics and infectious diseases. Fig 3 Q. Would you say that public authorities in your
This reflects the fact that many Asian countries have country are well prepared for the emergence of this risk?
14 Section 1: COVID-19 reshapes the emerging risk landscape 15 Section 1: COVID-19 reshapes the emerging risk landscape
Heightened interconnectivity
demands a coordinated response
COVID-19 accelerates long-term Beyond health, the pandemic is acting as an accelerant Last year’s Future Risks Report found that there is an outcomes of this could be better collaboration with
of existing or nascent geopolitical themes and trends. increasing potential for risks to influence each other in the private sector. It’s in the interest of both to work
shifts in the risk landscape: insights These pre-existing trends now accelerated by COVID-19 unpredictable ways. The COVID-19 pandemic is adding to together to address some of the most important
from Eurasia Group include the trajectory of China’s relationship with the that interconnectivity. threats, such as climate change.”
world (and especially the United States), technology
competition, supply chain reordering, policy responses Take social discontent and local conflicts, which our
“ The pandemic
The COVID-19 pandemic is stress testing governments to global climate change, nationalist and protectionist experts rank as the fifth-most-important emerging risk to
around the world, straining their resilience, institutional policies, and the role and appropriate use of industrial society. COVID-19 could plunge an estimated 49 million
capacity, and response effectiveness. In key global policy, among many other themes. people around the world into extreme poverty in 2020.3 has exacerbated
markets in Europe, North America, and Asia, the
pandemic is bringing about a wide range of destabilizing Moreover, the pandemic’s potential role as an accelerant
This will accelerate local conflicts and discontent, both in
lower- and high-income countries.
inequality. The fact
shocks to healthcare systems, economies, and goes beyond economic and geopolitical trends; it has that white-collar
households. the potential to accelerate the rise of all emerging risks in Interdependencies between risks demand greater
unforeseen and unexpected ways. For so many of these collaboration: governments must act together to workers could safely
Each of these will continue to force governments to
respond to and recover from shocks that are already
themes and their associated risks, the pandemic means address truly global threats such as climate change and
pandemics. When asked the level at which decisions
work from home
that what otherwise would have unfolded over many
realized and prevent and mitigate the impact of those years is, instead, taking place over just months. In other should be taken to counteract emerging risks, 50% of during lockdowns,
that are still to come. Insufficient responses will prolong
the economic and financial damage from the pandemic
words, slow tectonic shifts in the landscape have instead
become earthquakes, bringing ruptures and large-scale
the general public say at the global level, and 11% say at
the continental level. Just 30% say that decisions should
but blue-collar
and, in some cases, will cause political instability as dislocations to the global risk landscape. be taken at the country level, and just 9% say at the city workers couldn’t,
dissatisfied citizens punish ineffective governments. level. Interestingly, European cities still have a long
way to go: the general public is not convinced by and were therefore
Most immediately, the pandemic is exposing global
public health vulnerabilities, highlighting weakness in
the effectiveness of city-level decisions to face
emerging risks.
more exposed to the
national and global preparedness around healthcare virus, symbolized
capacity, response coordination, and readiness around Public authorities, the private sector, and civil society
therapeutic and preventative responses, including must collaborate to address challenges that need a
this. It’s another
vaccine development and equitable distribution. As multifaceted and coordinated response. Even within factor that may
the world shifts in late 2020 and into 2021 from crisis individual businesses, leadership must work together to
response to treatment and recovery, the geopolitics understand how a risk in one area of the business could undermine social
of health—challenged by greater nationalism and
an impaired multilateral system of governance—will
morph to impact another.
cohesion in many
continue to shape how quickly and how well the world “Today’s emerging risks are more integrated and have Western countries.
emerges from the pandemic. multiple angles, so businesses need everyone in the
room when it comes to tackling them,” says Georges — Renaud Guidée, AXA Group Chief
Stansfield, AXA Deputy Group CEO and Group General Risk Officer
Secretary. “At the government level, one of the positive
3
The World Bank, The impact of COVID-19 on global poverty, 20 April 2020
16 Section 1: COVID-19 reshapes the emerging risk landscape 17 Section 1: COVID-19 reshapes the emerging risk landscape
COVID-19 deepens the public’s sense of
vulnerability, but will it last?
Unlike previous crises, COVID-19 and the resulting People in Mexico, Italy and Respondents in the US and
lockdown measures are having a direct and personal
impact on people of all ages in all countries. As a result,
Spain feel most vulnerable to Hong Kong experience the greatest
73% of the general population say they believe that emerging risks increase in vulnerability
people across the world feel more vulnerable than they
GLOBAL (5.4)
did five years ago. Notably, people in Italy, Mexico, and Italy Percentage that are more vulnerable compared
Spain, some of the areas most impacted by COVID-19, 6.2 with five years ago
feel more vulnerable to emerging risks than those in the Mexico
UK, Germany, and Switzerland. Risk experts are even 6.2 Hong Kong
more pessimistic: 83% consider that the vulnerability of Spain 75%
populations has increased worldwide in the past 5.9
US
five years. Hong Kong 75%
5.6
In addition to feeling more vulnerable, the general public France Belgium
is now more risk-averse: 65% now take less risk in their 5.6 74%
daily lives than before COVID-19. Heightened feelings of Japan Italy
vulnerability and risk aversion have their own associated 5.5 70%
impacts. For example, 81% of the general population say Nigeria Spain
that emerging risks have or will soon affect their travel 5.5 69%
plans, and three-quarters say that they have negatively Belgium
Japan
affected their purchasing power. 5.4 68%
China
This lower risk tolerance explains most of the decisions 5.3 UK
Morocco 68%
made by governments in the first months of the COVID-19
crisis. It is also a key driver of the general public’s 5.2 Australia
increased demand for protection: even though 85% agree USA 63%
that zero risk does not exist, they want and expect to be 5.2 Morocco
protected, both by public authorities and private insurers. Australia 57%
5.0
Germany
UK
The emerging risk landscape is so dominated by 55%
COVID-19 that it is not yet clear whether these behavioral
4.8
Germany Switzerland
trends will continue when the pandemic ultimately 49%
recedes. If they do, such a long-term shift in public
4.8
Switzerland China
behavior will have a profound impact, not only on civil
4.7 25%
society but also on the economy.
Fig 4 Q. How vulnerable do you feel to the following Fig 5 Q. When you think about the way in which things
risks, on a scale of 0 to 10? 0 meaning you do not feel have been evolving in the past five years, would you say
vulnerable at all, and ten that you feel highly vulnerable. that people are more or less vulnerable?
18 Section 1: COVID-19 reshapes the emerging risk landscape 19 Section 1: COVID-19 reshapes the emerging risk landscape
Macroeconomic risk shoots
up the agenda
The COVID-19 pandemic is just as much an economic “Debt is going to be a major issue in the next 10 to 20 Experts in Spain, Mexico and Singapore are
crisis as it is a health crisis. Lockdowns caused GDP to years,” says Gilles Moëc, Chief Economist of AXA Group.
plunge 12% in the EU4 and 33% in the US5 in the second “We are responding to the crisis by allowing a massive
most concerned about macroeconomic risk
quarter of 2020. Globally, the IMF predicts that GDP will increase in both public and private sector debt. It’s
shrink by 4.9% in 2020.6 unavoidable and the right thing to do, but we must Percentage that rank macroeconomic risk as a top five emerging risk
acknowledge that many countries will have more debt as
It is, therefore, no surprise that experts now consider a percentage of GDP than at any time since the Second Spain 34%
macroeconomic risk to be the seventh-most-important World War. That’s fine now, as monetary policy is very
emerging risk. Last year, they ranked it tenth. When asked accommodating, but when normal monetary policy
Mexico 31%
which macroeconomic risks are most important, experts resumes, it may cause a crisis—particularly for Singapore 31%
rank durable mass unemployment first. In the long term, emerging markets.”
younger people who are just entering the job market are Italy 31%
likely to be affected most. Are public authorities prepared to respond to Ireland 30%
macroeconomic and financial risks? Our surveyed
Macroeconomic risk is felt most acutely in Spain (where experts are confident that they can respond to financial UK 28%
35% of experts consider it an important risk), Italy (31%), risks, but are much less confident when it comes to Indonesia 28%
and Mexico (31%). This could be because these countries macroeconomic risks.
have been particularly affected by COVID-19. However, China 27%
unemployment in the US has risen to above 10%, yet just This reflects the fact that while many governments and
Germany 26%
13% of US experts consider macroeconomic risk to be central banks have already responded much more rapidly
important—the lowest proportion globally. than they did to the 2008 crisis, it may not be enough Belgium 25%
given the unprecedented scale of the economic impact.
Switzerland 24%
Financial risks have also risen up the agenda to be
experts’ ninth-most-important emerging risk this year, Philippines 24%
and increased public and private debt levels are of
particular concern. Global net public debt is expected
France 23%
to rise to 85.3% this year from 69.4% last year.7 This will Thailand 19%
change the playing field for younger generations, who will
inherit unprecedented levels of debt.
Japan 17%
Australia 14%
US 13%
Fig 6 Q. Out of these 25 risks, please select the top five emerging risks that
may have a significant impact on society at large in the next 5–10 years.
4
Eurostat, GDP down by 12.1% in the euro area and by 11.9% in the EU, 31 July 2020
5
CNBC, Second-quarter GDP plunged by worst-ever 32.9% amid virus-induced shutdown, 30 July 2020
6
IMF, World Economic Outlook Update, June 2020, 24 June 2020
7
Financial Times, Governments face ‘massive’ rise in public debt, IMF warns, 15 April 202020 Section 2: countries ignore climate change at their peril 21 Section 2: countries ignore climate change at their peril
Climate change risk considered
Countries ignore climate most important in Europe
change at their peril Percentage that are more vulnerable compared
with five years ago
Germany
70%
Experts outside Europe deprioritize climate Italy
69%
change risk at an alarming rate Belgium
68%
In recent years, there has been a growing consensus that to Europe, it will inflame geopolitical tensions. This is and support that is needed. Of course, it is not only Switzerland
climate change poses an immense threat to society, as not far-fetched: the UN International Organization for governments that are responsible for addressing climate 64%
shown by our survey data. Now, however, that consensus Migration predicts that there could be up to a billion change; businesses also have a role to play. However, UK
appears to be weakening. Climate change has slid from environmental migrants moving within or across borders the pandemic means that there is a risk that businesses, 61%
the first to the second-most-important emerging risk to by 2050.8 like governments, prioritize survival and recovery at the
Ireland
society, with the number of experts that selected it as expense of climate change initiatives.
59%
significant falling from 67% to 54%. The general population’s perception of the severity
Singapore
of climate change risk reflects that of the experts.
There is an exception: experts in Europe—Germany, Italy, Europeans score climate change risk 6.3 out of 10 on
59%
Belgium, Switzerland, and the UK in particular—still AXA’s vulnerability index, which scores each emerging Japan
“ There is a danger
consider climate change to be the greatest emerging risk based on the general population’s perceived 58%
risk to society and even rank it above pandemic risk. vulnerability to it. Climate change is the emerging risk Australia
But the proportion of North America-based experts who that Europeans feel most vulnerable to. In contrast, the that, in focusing on 55%
consider climate change to be a top emerging risk has general population in the US gives climate change risk a COVID-19, the issue France
54%
fallen to 46% from 71% last year, and experts located in score of 5.7 out of 10, and those in Africa score it at 5.3.
Indonesia, Thailand, Mexico, and the Philippines are all that is most pressing China
51%
less concerned about the impact of climate change than
the global average.
Surveyed experts and the general public in certain
countries appear to be less concerned about the threat
and visible, other Spain
posed by climate change, but the more important issue emerging risks such 50%
This is likely to be a direct consequence of the COVID-19 is what governments do. The two are interlinked: by
crisis: public authorities and experts are focusing on expressing their concerns, the public can nudge decision- as climate change US
45%
what they see as a more imminent threat at the expense
of longer-term challenges such as climate change. It is
makers towards policies and regulations that address
what some have called the “greatest threat of the
or pollution get Philippines
42%
concerning because it is still a risk that demands urgent, 21st century”. overshadowed. Mexico
coordinated action by governments, businesses, and
36%
the general public around the world. Without it, climate Yet just 16% of experts believe that public authorities — Renaud Guidée, AXA Group Chief Thailand
change will not only cause more extreme weather events are well prepared to deal with the threat posed by Risk Officer
climate change. While this represents a four percentage
22%
such as flooding, forest fires, and heatwaves, but also
accelerate other emerging risks. For example, if climate point increase from last year, the lack of confidence Indonesia
change leads to mass migration from sub-Saharan Africa is stark, given the scale of government intervention 21%
Fig 7 Q. Out of these 25 risks, please select the top
five emerging risks that may have a significant impact on
society at large in the next five to ten years.
8
CMCC, Environmental Migrants: Up to 1 Billion by 2050, 22 May 201922 Section 2: countries ignore climate change at their peril 23 Section 2: countries ignore climate change at their peril
Only 16% of experts believe public authorities are well prepared
for climate change risk
Yes, Yes, No, not No, not
absolutely somewhat really at all
2% 1% 10%
14% What is AXA doing to tackle
28%
climate change?
38%
2020 2019 Ulrike Decoene, AXA Group Head of
Communication, Brand,
and Corporate Responsibility
51% “Businesses should and will take a more active role in
56% addressing climate change. To be meaningful, there
must be a collective effort from institutional investors
like us, corporates, and public authorities.
Fig 8 Q. Would you say that public authorities in your country are
well prepared for the emergence of climate change risk? AXA has developed a clear climate change strategy.
Its core elements are a commitment to achieve
investment climate neutrality by 2050, double our
green investment target to €24bn by 2023, launch
transition bonds, and totally exit the coal industry
through underwriting restrictions.
We are active members of the Net-Zero Asset Owner
Alliance (NZAOA) and the Task Force on Climate-related
Financial Disclosures (TCFD), and we chair the World
Economic Forum CEO Action Group for a European
Green Deal.
Corporates must engage firmly with the fight against
climate change by adopting ambitious transition plans,
and AXA, as an insurer and investor, is ready to support
and help those corporates to transition to greener,
more sustainable activities.”24 Section 2: countries ignore climate change at their peril 25 Section 2: countries ignore climate change at their peril
Experts overlook natural resources risk
as the biodiversity crisis accelerates
Like climate change, natural resource management and Reshaping the global climate agenda recently pledged to be carbon neutral by 2060. Several
biodiversity risk have dropped down the agenda, and companies and investors have also heeded the call,
experts now rank this as the eighth-most-important risk – Insights from Eurasia Group committing serious amounts of cash and strategic
to society: in 2019, they ranked it fifth and, in 2018, fourth. capital to accelerate decarbonization.
Experts outside Europe do not even consider it a top-ten
In many ways, the COVID-19 pandemic demonstrates the
risk to society. But caution is warranted. Some governments—most
trajectory of the world if climate change is not addressed.
notably the US, Brazil, and Mexico—have rolled back
Zoonotic diseases—those that jump from animals to
They should not underestimate the threat. According green programs or supported fossil fuel industries
humans—and the effects of a changing climate share
to a major study by the UN, about one million animal without green conditionality, thus potentially “locking in”
the same pathology in that they stem from physical and
and plant species are under threat of extinction – additional greenhouse gas emissions. There is also some
chemical changes in the natural environment and cause
many within the next few decades.9 This is more than anecdotal evidence that companies and investors are
massive disruption to lives and livelihoods.
at any other point in human history, and it is not just paring back climate action because of economic distress,
an environmental issue: the UN finds that declining such as the shipping industry, where several owners and
With a 1.5-degree temperature rise looking increasingly
biodiversity will slow progress on 80% of its Sustainable operators talked of slowing the transition of their fleets to
inevitable because of historical emissions, the physical
Development Goals relating to poverty, health, hunger, decarbonized fuels because of a fall in shipping demand,
impact of climate change is likely to interact with and
and water. as economic activity and trade have cooled.
help drive other emerging risks. Already, climate change
is widely recognized as a primary source or accelerant
There are multiple ways governments can address Multilateral approaches to climate change were just
of the forces leading to several political watershed
the decline in biodiversity, for example, promoting starting to recover from the withdrawal of the US from
moments in the past decade, including the Africa–EU
sustainable agricultural practices, fishing quotas, and the Paris Agreement, and now, the pandemic is
and Central America–US migrant flows, the Arab Spring,
green spaces in urban areas. But experts surveyed are not accelerating a new form of climate multilateralism—one
and the conflicts in Yemen and Syria. Looking ahead,
confident in public authorities’ abilities: just 13% believe based on highly ambitious national and regional actions
with changing temperatures and extreme weather events
these bodies are prepared for the emergence of this that raise the collective global bar. The EU’s Green Deal
affecting populations around the world, the likelihood of
risk, which makes it a risk they are second-worst and its provisions on trade and border carbon
local and regional conflicts over food, water, shelter, and
equipped to handle. adjustments have forced a rethink on climate action in
energy can be expected to rise.
countries that otherwise would not be predisposed to
high climate-change ambition, for example, Brazil.
The question—brought into sharp relief by COVID-19—
Similarly, investor-led efforts have at least partially
is when and how to bring about this decarbonization
contributed to a change in approach from countries like
and keep the world focused on the challenges from a
Japan, which had initially resisted efforts to restrict
changing climate. From the early days of the crisis, there
overseas coal financing and issued a stronger national
were calls to “#buildbackbetter” and implement “green
pledge, with both positions now under review.
stimulus.” Several governments have responded, led
by the EU, and with notable commitments from South
Korea, India, and Canada, channeling money into green
projects in some cases and attaching green
conditionality to a “vanilla” stimulus in others. China has
9
United Nations, Nature’s dangerous decline ‘Unprecedented’; Species extinction rates ‘Accelerating’, 6 May 201926 Section 3: cybersecurity and geopolitical tension remain formidable foes 27 Section 3: cybersecurity and geopolitical tension remain formidable foes
Cybersecurity and geopolitical
tension remain formidable foes
Experts and the public
are on high alert
Cybersecurity has fallen one place to be the third-most- to security—which experts rank as their sixth-most- Cyber warfare considered the most important new threat to security
important risk to society in the next five to ten years, but important, up from ninth place last year. Experts in the
it is still considered to be a major threat. More than half US, UK, Australia, and France are particularly concerned
2020 2019
(51%) of experts identify it as a top risk. The public is also about new security threats. Of the experts that consider
aware of this threat: computer-related risk is the threat this a major risk, 47% say that cyber warfare is their main
they feel second-most vulnerable to. concern, up from 37% last year.
COVID-19 has exacerbated cybersecurity risk. Many How can organizations respond? One of the most 47%
people now use more online devices and systems to effective and overlooked methods is to extensively train
communicate with colleagues, friends, and family, which the workforce, which means that cybersecurity spending
increases the points of cyber vulnerability. And people must be maintained or increased. It may be tempting to 37% 36%
working from home may also be using personal devices, reduce investment in the current economic climate, but it
which, unlike office equipment, may not be equipped is a high-risk strategy.
with the latest cyber defenses.
“We worry that organizations are cutting their IT spend or
The number of attacks has also increased. For example, 10
delaying system upgrades to save money, but they really
21%
phishing emails increased 600% between February and shouldn’t, because the risk is elevated at the moment,”
March 2020, as criminals used widespread awareness of says Nancy Bewlay, Global Chief Underwriting Officer at 16% 15%
the pandemic to lure people into clicking on dangerous AXA XL. “Organizations must do many things to protect 14%
content. And hospitals are prime targets: Brno University themselves, and educating the workforce—which is the 11%
Hospital, for instance, the site of one of the Czech first line of defense—is particularly important. It’s a great
Republic’s biggest COVID-19 testing laboratories, was starting point if employees can practice safe habits and
forced to shut down its entire IT system after suffering a spot phishing emails and malicious links.” 2% 1%
cyber-attack.
Cyber warfare and Evolving terrorist Malicious use of Fake news Other
Cyber-attacks are a significant threat to society because nation state-sponsored attack methods: new technologies:
they can strike anywhere—from a retail bank that holds cyber attacks lone wolves, bioengineering,
the personal data of millions of customers to a utility that
small groups 3D printing, drones
controls critical power infrastructure. And the increasing
sophistication of attacks means that cybersecurity is also
closely tied with another important risk—new threats Fig 9 Q. What is your main concern about new threats to security?
10
Infosecurity, COVID-19 drives phishing emails up 667% in under a month, 26 March 202028 Section 3: cybersecurity and geopolitical tension remain formidable foes 29 Section 3: cybersecurity and geopolitical tension remain formidable foes
Geopolitical risk drives businesses
to reassess supply chains
Technology bolsters economic The consequences of this resilience can’t be overstated: Surveyed experts rank geopolitical instability as the For example, many governments around the world
although economies around the world took severe hits fourth-most-important risk to society; last year, they have taken ownership stakes in strategically important
resilience to COVID-19: insights from as governments imposed lockdowns to contain the ranked it third. This does not mean that geopolitical businesses to prevent them from going bankrupt during
Eurasia Group virus, the ability to shift rapidly to online business and risk is subsiding; it has slipped one place in the rankings the pandemic. With greater control of businesses, they
commerce via video conferencing, email, and social to accommodate the surge in the importance of may be tempted to use protectionist measures, such as
media messaging apps likely averted an even more pandemic risk. stopping investment from a foreign-owned competitor or
As the COVID-19 virus spread around the world earlier severe economic crash, rise in unemployment, and setting import restrictions.
this year, rapid lockdowns forced millions of citizens, associated welfare losses. Of the experts who consider geopolitical tension an
students, and businesses to shift their work, education, important emerging risk, 51% are most concerned with “I’m concerned that we might go back to the 1950s and
and entertainment to a digital world. This was an Despite this notable success, business continuity is now the rise of nationalism and populism, while 31% are most 1960s type of day-to-day government management of
unprecedented transition, compressing several years’ increasingly reliant on a small number of influential worried about tensions between nation-states. companies,” says Gilles Moëc, Chief Economist of AXA
worth of evolution in digital business models into a few technology companies. As lockdowns took hold, Group. “Companies that received a lot of support from
months. previously unknown videoconferencing apps became Geopolitical risk encompasses several intricate issues, the state during COVID-19 will, to an extent, come under
household names overnight, as millions of companies from the erection of non-tariff trade barriers to the state control. And with populations needing results, it
Most notably, the pandemic has showcased the and households came to rely on their services to conduct undermining of global multilateral institutions, many of will be very tempting for governments to protect national
strength of the internet. Despite some early concerns business and stay in touch with friends and family. which have become more complex because of COVID-19. champions. I’m seeing a lot of temptation to go back to
about how telecommunication and data networks Grocery stores, restaurants, and other retailers adapted some pretty inefficient practices.”
would handle substantially increased loads, in general, to an unprecedented shock to their business models by
internet infrastructure has held up well during the crisis. embracing online ordering and delivery. E-commerce
Telecommunication carriers, internet service providers,
and related companies adapted to meet extraordinary
demands on bandwidth, with internet traffic rising 60% in
some regions, according to the OECD.11
The fact that the rapid and unprecedented shift to
sites became hubs for the distribution of essential goods,
including personal protective equipment. Digitalization
now appears to be a vital prerequisite for businesses.
Only a year ago, it may have been just one component
among others in a long-term strategy.
“ Many businesses are re-evaluating their supply
chains, especially if they are very complex—across
a number of countries, with inter-related suppliers.
When there is a sudden pandemic, trade tariff,
distance working and learning via broadband occurred
without major damage or disruption to the service
or cybersecurity event, you need supply chain
underscored the basic underlying resilience of the resilience, and complex supply chains are not
internet’s decentralized architecture and investments in
facilities-based services in most countries. conducive to this. It may not be the most cost-
effective supply chain, but it may be better to incur
higher costs and have more flexibility.
— Scott Gunter, CEO, AXA XL
11
OECD, Keeping the internet up and running in times of crisis, 4 May 202030 Section 3: cybersecurity and geopolitical tension remain formidable foes 31 Section 3: cybersecurity and geopolitical tension remain formidable foes
The extent to which geopolitical instability is perceived Experts in China are most
as a significant emerging risk varies by country. In China,
for example, 69% of experts consider it a major risk,
concerned about
which makes it the joint-most-important emerging threat geopolitical tension
alongside cybersecurity. Large proportions of experts
in Belgium (56%), Australia (48%), Germany (47%), and China
France (45%) also consider it a major risk. In contrast, it is 69%
a major risk for fewer than 30% of experts in Thailand, the Belgium
Philippines, Indonesia, Ireland, and Mexico. 56% Trade, supply chains, and Economic nationalism will accelerate in the name of
Australia post-pandemic security.
How can businesses respond? With geopolitical tension 48% deglobalization in the COVID-19 era:
and the impact of COVID-19 in mind, many are looking at Germany insights from Eurasia Group In recent years, several governments, including the
their supply chains: reducing their dependency on certain 47% United States, have taken actions widely viewed as
suppliers, or suppliers from particular countries, and France nationalist. They have implemented protectionist trade
creating more flexible and/or regionalized supply chains. 45% The pandemic is likely to play a major role in helping policies on global trade, including more frequent use
Switzerland reshape global supply chains. It will undoubtedly of tariffs and non-tariff barriers; they have increased
42% produce additional friction to cross-border trade and barriers to immigration and disregarded, or even actively
UK investment, aggravating nascent trends toward the weakened, international organizations meant to foster
41% nationalization and regionalization of supply chains multilateral governance. More global data flows are
Singapore and broader deglobalization forces in play before the now subject to data localization policies and pressures
39% pandemic. Already, COVID-19 has generated destabilizing than they were a few years ago. A number of developed
Spain shocks across many global industries. Some of these, of economies, reacting to the rise of populist and nationalist
37% course, have come from the sudden decline in demand, forces in their own countries, have been more sensitive to
US but longer-lasting effects may happen on the supply side concerns that globalization has damaged their domestic
34% from permanent job losses and the disruption to supply industrial and manufacturing capacity, and they are now
Japan chains. more actively trying to “reshore” much of this capacity.
31%
Italy The slowing (or, in some cases, ending) of production Following the pandemic, national security concerns
30% because of COVID-related disruptions is resulting in will increasingly be injected into efforts to regulate
Ireland some shortages of essential goods (including medical once largely neglected strategic sectors. In other words,
29% equipment, pharmaceuticals, food, and other basic governments will argue that enhanced state intervention
Mexico essentials) and difficulties in distributing them to where is needed to ensure national economic and security
27% they are needed. interests; healthcare, food, and technology are the
Philippines three national security domains most likely to attract
25% Moreover, as the political backlash and, in some cases, heightened scrutiny in the wake of the pandemic.
Indonesia outright social unrest faced by governments perceived
21% to have mishandled their crisis response grows, many
Thailand governments will intervene in certain industries because
9% of their importance to the overall economy, people’s
basic well-being, and governmental control and security.
Governments that are concerned about social discontent
Fig 10 Q. Out of these 25 risks, please select the top and local conflict may be more willing to intervene in the
five emerging risks that may have a significant impact on economy to the extent of mitigating social unrest.
society at large in the next five to ten years.32 Section 4: Experts now comfortable with tech risk, but new threats emerge 33 Section 4: Experts now comfortable with tech risk, but new threats emerge
Experts now comfortable
with tech risk, “ Advanced technologies, such as AI and machine
learning, are increasingly being used to predict the
future. There’s a real risk that these predictions will
be wrong or biased if the models are incorrect or
but new threats emerge are not based on enough data.
— Nancy Bewlay, Global Chief Underwriting Officer, AXA XL
Experts appear less alarmed about the impact of ranked this risk 22nd in 2020, a sharp decrease from 13th
technology-related risks on society this year. For in 2019. This is likely because, in the current climate of
example, they ranked artificial intelligence and big data heightened health concerns, people are perhaps more
as the sixth-most-important risk in 2018 and 2019, but accepting of the potential risks associated with medical
only as the twelfth-most-important risk this year. In advances and innovations if it provides them with access
addition, fewer experts consider several technology- to higher quality healthcare.
related risks to be “rapidly emerging” this year. For
example, the proportion that considers risks associated But new technology-related threats are looming.
with disruptive technology and artificial intelligence to For instance, although experts only rank ethical risks
be “rapidly emerging” has fallen by around 15 percentage regarding the use of technology as their fourteenth-most-
points compared with 2019. important emerging risk, the proportion who say the
public is aware of this threat rose to 32% from 19%
Why are technology-related risks now considered last year.
less important? Perhaps it’s because COVID-19 has
triggered a surge in the use of technology, whether it Ethical risks associated with technology of most concern
is families communicating for the first time via video are data privacy and the potential for algorithms to
conferencing platforms, bank customers increasingly entrench bias and discrimination. As technology is
seeking assistance via online channels, or manufacturing increasingly deployed by businesses and governments,
businesses investigating the potential of robotics public perception of this risk will continue to worsen
to replace manual workers on production lines. As unless careful steps are taken to rid bias from any
individuals and businesses become more familiar with technology. For example, algorithmic bias dominated
technology and better understand the benefits, they may the news agenda in the UK for a number of days in
be more accepting of the risks and the downsides August 2020 when it was revealed that the technology
of technology. used to generate student grades in lieu of exams
disproportionately lowered the grades of pupils living in
This is illustrated by the major fall in the ranking of risks poorer areas and not attending private schools.
relating to medical advances and innovations. Experts34 Section 5: Mental health and misinformation: candidates for tomorrow’s top threat 35 Section 5: Mental health and misinformation: candidates for tomorrow’s top threat
mental health.12 No wonder 81% of experts do not believe
Mental health and Mental health: COVID-19 public authorities are prepared for the emergence of
health-related risks.
intensifies an existing
misinformation: candidates major challenge
Businesses can play a role too. “A lot of companies look
after their employees’ health through offering health
for tomorrow’s top threat insurance, which is useful, but primarily focuses on
physical health,” explains Karima Silvent, AXA Chief
Human Resources Officer. “Companies can do more on
mental health by educating managers about it because,
Only 7% of surveyed experts identify changing health while they can’t necessarily solve the issue, they can be
practices and new occupational diseases, including equipped to identify and discuss issues with employees
mental health, as a major emerging risk to society, and direct them to where they can receive support.”
meaning it does not even enter the top 20 most-
Although pandemics and infectious diseases were only may be underestimated for now: mental health and
important threats. By addressing mental health as a key component of the
considered the eighth-most-important emerging risk misinformation. These are not new, yet both threats
last year, we flagged it as an under-the-radar threat have the potential to grow exponentially in the aftermath response to the pandemic, countries, businesses, and
However, mental health challenges must not be the general population can emerge much more informed
that had the potential to cause significant disruption. of COVID-19.
overlooked. Depression affects 264 million people about mental health and better prepared to identify and
This year, we highlight two additional risks that
globally. Suicide is the second-leading cause of death in treat conditions when they arise.
those aged 15–29, and more than one in five people that
live in a region impacted by conflict have a mental health
“
condition.12 The human cost is vast, but so too is the
Understanding the factors influencing mental health impact on the economy: depression and anxiety cost the More than half of individuals
issues in this unique setting is very important for us global economy more than $1tn per year.12 believe emerging risks have
so that we can extend our help in the right direction. This was the situation before COVID-19 unfolded. The
already or will shortly affect
United Nations predicts that the pandemic has the their mental health
Therefore, we triggered a conversation on this very potential to make the situation much worse, potentially
relevant topic by surveying 5,800 people during the causing a major global mental health crisis that will
Yes No, but it will happen in the near future
affect children, young people, and healthcare workers.13
lockdown across seven countries: Belgium, France, In addition to the trauma caused by disease and
No and it won't happen
Italy, Germany, Switzerland, the UK, and Spain. We death, social isolation and economic uncertainty have
heightened anxiety and depression.
have derived unique insights and strong learnings
This is reflected in our survey data: 58% of surveyed 31%
that can help individuals and society as a whole. individuals say that emerging risks are already affecting 42%
The grave effects of the pandemic on mental health their mental health or that they will in the future.
Individuals in Hong Kong, Japan, China, and Australia are
inspired us to carry out this study. most likely to say that emerging risks are already or will
soon affect their mental health. 27%
— Antimo Perretta, CEO, AXA Europe
Public investment in prevention and treatment services
(Check out A Report on Mental Health and Wellbeing in has not kept pace with the growing problem. Countries, Fig 11 Q. Have these risks had any of the following
Europe to be published on October 8 at axa.com) on average, spend just 2% of their health budgets on consequences? (Answer with respect to mental health)
12
United Nations, COVID-19 and the Need for Action on Mental Health, May 13 2020
13
World Economic Forum, U.N. warns of global mental health crisis due to COVID-19 pandemic, May 14 2020You can also read
